Chow brothers forced to make full takeover offer for Chow Group
NBR Rich Lister John and Michael Chow have been forced to make a full takeover offer for the shell they used for a reverse listing after the distribution of shares to their families triggered provisions in the Takeovers Code.
The brothers reduced their personal holdings to a combined 88.4% from the 95% stake they received for selling two buildings in one South Auckland accommodaton complex to RIS Group [NZAX: RIS], before renaming it Chow Group.
Because they held more than 90%, the code required them to offer a "fair and reasonable" price to existing shareholders. The brothers are offering 1.1c per share to shareholders, a discount to the 7c price the NZAX-listed stock last traded.
"We are still obliged by the Takeovers Code to give all other shareholders the opportunity to sell their shares to us at a price certified to be 'fair and reasonable' by an independent adviser," chairman John Chow said in a letter to investors.
"We have acquired a company which starts with very little but with our drive and skills we see a bright future and hope you share our sense of vision and will choose to keep your stake in Chow Group."
The independent adviser's report by Campbell MacPherson called the circumstances of its report "rare and somewhat counter-intuitive" in that the Chow brothers' interests had undertaken a reverse takeover to list their assets and weren't seeking to enforce their right to mop up the shares.
Chow Group generated a profit of $7.7 million on revenue of $9.1 million in the 11 months ended February 29, which included eight months of trading as Chow Group, the report shows. That revenue included an $8.1 million unrealised gain in the value of investment properties.
The property investor is forecasting a profit of $8.7 million in the year ending June 30 on revenue of $10.4 million, of which rental income is estimated to be $1.4 million. The following year profit is expected to fall to $1 million as the unrealised gain in the property portfolio isn't repeated, but as rental income rises to $1.9 million.
The company's complex provides short- and long-term accommodation in South Auckland and has been operating at a slightly high occupancy rate than projected at 90% and a higher average room rate of $53 per night per occupied room.